Tuesday, December 18, 2012

Win for the EU: Samsung drops all requests for standards-based sales bans against Apple in Europe

The European Commission's Directorate-General for Competition (DG COMP) has apparently scored a very significant win that benefits consumers: According to media reports, Samsung has withdrawn all of its requests for sales ban against Apple products on the basis of alleged violations of standard-essential patents (SEPs) on a Europe-wide basis.

The statement does not say that Samsung has dropped its SEP lawsuits. It is still going to seek monetary compensation, which is the appropriate remedy in connection with SEPs (as Judge Posner also explained) and, as such, doesn't raise antitrust issues, while sales bans do. In order to get paid, Samsung still needs to litigate. But Samsung is no longer asking courts to impose product bans on Apple. Samsung had previously brought requests for injunctions in multiple countries, particularly in Germany, the UK, France, Italy, and the Netherlands as you can see in this list that I compiled more than a year ago (there were some subsequent filings as well, at least with the Mannheim Regional Court).

There can be no doubt whatsoever that the European Commission was behind this. Samsung would never have done this voluntarily, especially not in jurisdictions such as Germany that do not rule out SEP-based injunctions at all. Nor are there signs of a partial or complete settlement (otherwise there would have been a joint announcement, with Apple also dropping some claims). The only plausible explanations for this unilateral withdrawal involve the European Commmission. One is that the European Commission presented Samsung with Hobson's Choice, and the other possibility is that Samsung altered course before reaching that point.

There are at least two measures with which the European Commission could have threatened Samsung at this stage, and I venture to guess that both options were being discussed, even if only informally, between the Brussels-based competition regulator and the Korean electronics giant:

Almost a year ago, the Commission had launched formal antitrust investigations of Samsung's SEP assertions against Apple in Europe. The next step for the European Commission would have been (without a firm deadline under the law) to issue a Statement of Objections (SO). Prior to issuing an SO, the Commission always has confidential talks with suspected abusers and offers them an exit strategy, be it in the form of commitments they make to the Commission or in the form of a modified behavior. At such meetings the Commission usually presents an outline of an SO, or even a near-complete draft.

So far, none of Samsung's requests for SEP-based injunctions succeeded, but on January 25, the Mannheim Regional Court is going to rule on two such lawsuits. I reported on the related hearings/trials (1, 2, 3), at which the question of a possible EU intervention was one of the key issues discussed in open court. If the European Commission had not taken any action in the meantime, Samsung would have been reasonably likely in my observation to win at least one SEP-based German injunction on January 25. The Commission would have been free to contact the Mannheim Regional Court at its own initiative, and the Mannheim Regional Cour could also have sent a letter to Brussels inquiring about the likely outcome and timeline of the investigation (but wasn't formally required to do so). At the most recent such trial, Samsung even mentioned that it informed the Commission of those ongoing Mannheim lawsuits, which Apple described as old news because the EU antitrust authority had been aware of them all along.

If the European Commission was going to send an official communication with Judge Andreas Voss ("Voß" in German) in Mannheim, it would have had to do so in the very near term -- in mid-January at the very latest, and more likely now or in early January. A letter by the Commission to Judge Voss would have had severe implications for Samsung's SEP enforcement effort. It would have reduced the likelihood of an injunction being granted, and it would likely have been an indication of Samsung being fined.

What's unclear at this point is whether Samsung has a gentlemen's agreement with the European Commission that the antitrust investigation will be dropped (without remedies, or maybe with only soft remedies) if it withdraws its European requests for injunctions (again, it does not have to, and apparently has not, withdraw its pursuit of FRAND compensation). If there is such an agreement, then the European Commission will soon comment favorably on Samsung's announcement and close the case. If there is no such agreement, then the investigation may continue and Samsung may still be fined, but it would certainly be in much better shape than if it had carried on with its enforcement, especially in Germany.

In the summer, Motorola accepted a licensing offer from Apple in Germany. It's an offer under which Apple will pay FRAND royalties for Motorola's SEPs in Germany, with the FRAND rate to be judicially determined (most likely in Mannheim). It's not a broad cross-license: just an SEP license from Motorola to Apple on a cash-only basis, with the amount of cash to be determined now. As a result, Google (Motorola) is not pursuing injunctive relief over SEPs against Apple in Germany at this stage.

Motorola had offered Microsoft a license to its worldwide SEPs, including German SEPs, in a letter sent from the Chicago area to the Seattle area in October 2010, and Microsoft filed a FRAND contract action in the U.S. in November 2010, eight or nine months before Motorola filed its German enforcement actions. As a result, the FRAND contract issues between those two companies are now a matter of U.S. law. But Motorola is still looking for ways to win and enforce SEP injunctions against Microsoft in Germany (though it looks at this stage that it won't get to do so prior to an appeal of a final U.S: ruling, and an appeal of the part concerning injunctive relief is unlikely to succeed given the Ninth Circuit's ringing endorsement of the district court's approach).

Even though Samsung did not withdraw totally voluntarily (except perhaps in an exceedingly formalistic sense), we should all applaud this highly constructive action. I would encourage Samsung to do so in other jurisdictions as well. It is still pursuing SEP injunctions against Apple in the United States, South Korea, and Australia, and possibly elsewhere (Japan?).

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About Me

Florian Mueller is a former award-winning intellectual property activist with 25 years of software industry expertise spanning across different market segments (games, education, productivity and infrastructure software), diverse business models and a variety of technical and commercial areas of responsibility. In recent years, Florian advised a diversity of clients on the patent wars surrounding mobile devices, and on their economic and technical implications. (In order to avoid conflicts of interest, Florian does not hold or initiate transactions in any technology stocks or derivatives thereof.) He is now developing a game app for smartphones and tablet computers.